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Currency Market Analysis

Jan 13, 2020 | Currency Market Analysis

Global Themes

Weakness in the yen and sterling provided a boost to the greenback. America’s dollar steadied against the euro and Canadian dollar but pushed to multiweek highs versus the U.K. pound and its strongest in months against the yen. Expectations of a midweek signing ceremony at the White House on a first phase trade deal provided a lift to market sentiment. While firmer, the dollar’s prospects remain uneven in the wake of a mixed U.S. jobs report last week that showed slower hiring and wage growth but steady unemployment at half-century lows. Sterling’s slide is dominating attention today as weak U.K. data and dovish remarks from a Bank of England official bolstered prospects of a local rate cut as soon as this month. Reduced geopolitical uncertainty and trade hopes running higher knocked the yen to seven-month lows. 


Canada’s currency treaded water above late 2019 lows thanks to optimism over U.S.-China trade. The loonie also caught a gentle tailwind from last week’s stronger than expected local jobs report that bought the Bank of Canada more time to keep lending rates unchanged at 1.75%. Canada added more than 35,000 jobs in December, a larger than expected amount that pushed unemployment three ticks lower to 5.6%.


The U.S. dollar was firm to steady, owing its buoyancy to weakness in rival currencies like the yen and sterling. The dollar remains on more of a pedestrian path after data Friday showed that hiring in December slowed to 145,000 from more than 250,000 in November. Wage growth slowing below 3% highlighted tepid underlying inflation which will keep dollar-friendly rate increases out of the conversation for some time to come. Key for the dollar this week will be U.S. numbers on consumer inflation (Tuesday) and retail spending (Thursday).


A more than 0.5% decline pushed sterling below a key psychological floor against the greenback. The pound tripped and fell into its best hole in more than two weeks after U.K. data showed significant weakness in growth and manufacturing in November, boding bearishly for fourth quarter GDP. Meanwhile, dovish talk from a U.K. central banker over the weekend added to the case for the Bank of England to cut borrowing rates from 0.75% as soon as its next meeting on Jan. 30. 

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